NBP gas prices rose sharply on Wednesday following further gains made across the U.S. Henry Hub gas market and increased risk of severe weather conditions for Europe.

Gas Market

NBP gas prices rose sharply on Wednesday following further gains made across the U.S. Henry Hub gas market and increased risk of severe weather conditions for Europe. Arctic weather conditions have swept through the U.S. Midwest and North East, driving fears around disruptions to LNG feedgas flows. With the adverse weather expected to persist into next week, the front month Henry Hub contract has increased by 57.1% over the past two sessions. In Europe, the likelihood of a sudden stratospheric warming, a weather event that causes severe winter weather, occurring in February has increased, suggesting gas demand levels could rise significantly in the coming weeks. With forecasts also suggesting a lower wind view over the same period, the front month contract increased by 9.73p to close at a 7-month high of 103.68p per therm. With gas-for-power demand levels remaining elevated in the short-term and storage levels diminishing, the Day ahead contract also posted a significant day-on-day gain of 13.10p to settle at 105.10p per therm.

Power Market

The GB Baseload front month contract rose sharply on Wednesday, supported by well-below-average wind output forecasts and a bullish NBP gas market. The February 26 contract increased by £8.60/MWh, or 8.7%, day-on-day to settle at £107.35/MWh. In contrast, the prompt market eased on above normal wind levels forecast for the rest of the week, coupled with slightly warmer temperatures. The Day ahead contract shed £2.60/MWh to close at £87.99/MWh. Strong gains across wholesale gas markets on Wednesday supported European carbon markets, retracing the losses made over the previous two sessions. European Allowances for Dec 26 rose by €2.17 to settle at €87.10 a tonne. Meanwhile, Dec 26 UK Allowances gained £2.75 to close out the session at £67.21 a tonne.

Oil Market

Crude oil markets edged up on Wednesday after U.S. President Donald Trump rolled back on threats to impose tariffs on European countries that refused to support his bid to seize Greenland. The move reduced the risk of an all-out trade war between the U.S. and Europe, which supported the global economic outlook and future oil demand levels. During his speech at Davos, Trump also indicated that he would not use excessive force to take Greenland and that no further military action would be taken in Iran, both of which helped to alleviate recent geopolitical tensions. The front month Brent contract gained just 32 cents by the close to settle at $65.24 a barrel. Meanwhile, the WTI contract for March delivery increased by 26 cents to end the session at $60.62 a barrel.

Markets this morning

The NBP has opened in volatile fashion this morning. Having hit an intra-day high of 110.99p per therm earlier in the session, the contract last went through at 102.00p per therm, 1.68p below last nights close. The market remains tentative to forecasts of severe cold weather conditions during February as well as the declining storage levels. Strong wind levels expected now for the coming days as well as warmer temperatures have eased further upside on the prompt. The Day ahead contract last went through at 102.50p per therm, a decrease of 2.60p on yesterday’s close. Crude oil prices have also eased as the market assesses the supply and demand outlook and the impact of Donald Trump’s comments at Davos.